Nevada is considered one of the most tax-friendly locations in the US. The state has implemented policies that make it extremely attractive for high-net-worth individuals looking for an area to invest in. There are 9 states in the US that do not impose income tax on their residents but Nevada has arguably gone further than any other state in creating an environment where businesses can thrive and individuals are properly rewarded.
Not only is there no personal income tax, but the state also does not levy a corporate tax. In fact, there’s a whole raft of tax exemptions in place to help businesses succeed and ensure that the money earned by individuals stays in their pockets.
This has led to very high-net-worth individuals moving to Nevada, particularly to its most famous city, Las Vegas. From the world of movies, Nicholas Cage and Wayne Newton live in Las Vegas. Some of the most famous sports celebrities live here too including Floyd Mayweather Jr. and Mike Tyson. Celine Dion also has a home in Las Vegas. Then there are the less-known but very influential heads of industry, entrepreneurs, and heavy hitters from the world of business such as Steve Wynn, owner of the Wynn Casino.
In response, the dessert has blossomed with high-end communities and some luxury homes in Las Vegas showcase the height of architecture and design for modern homes. Las Vegas is much more than a gaming city and the entertainment offered by The Strip. It’s now a premier destination for those looking to relocate, a true oasis set in the Nevada desert.
What are the tax benefits of Nevada?
No personal or corporate income tax
As a high-net-worth individual, the thought of not having to part with any of your personal income makes it almost a no-brainer when it comes to choosing where to buy property, do business, and live. You may have investment portfolios that bring in a substantial amount of personal income, especially if you are near retirement or already retired. Nevada won’t take a dime of this money.
While full relocation to Nevada or another tax-friendly state may not be possible for some due to the nature of their business, or simply because of their connections to a particular area, it is still possible to buy residential property and set up a business in Nevada. This would allow you to claim residency or even be considered domiciled, giving you access to certain if not all the state’s tax benefits. You’ll also benefit from there being no franchise or inventory tax. Should you decide to issue shares in your company, these will also be exempt from tax. Furthermore, businesses enjoy minimal employer payroll tax and a judicial system that strongly favors businesses by minimizing their risks from litigation.
No succession or inheritance tax
A particular concern among high-net-worth individuals is how to pass on generational wealth. A shocking statistic suggests that 70% of families considered wealthy will lose their wealth within 1 generation. This figure rises to 90% in the succeeding generation. With Nevada’s no inheritance or estate tax, everything you have can be bequeathed to your children without the government taking a considerable chunk. The future generation of the family gets their inheritance in its entirety.
No tax on capital gains
Not only will you not be taxed on ongoing business activities, but when it comes to selling assets, again there will be no deduction. The equity you make from selling a luxury home in Las Vegas will go completely to you.
If we look at the median sold price of homes in Las Vegas over the last 5 years we see stellar appreciation rates. In February 2019, the median sold price was $250,000. By February 2023 that figure had risen to $382,000. This means that in the span of 5 years, your home would have risen in value by 52%.
When it comes to luxury homes in Las Vegas, it is more difficult to calculate price increases as luxury homes vary so greatly in price, and figures can be skewed strongly by outliers. However, as we will see later, there has been an explosion in the development of high-end luxury properties in the area, a strong indicator of demand in the area.
Better returns the more you have
The economic environment in Nevada works on the philosophy that those who invest in property and entrepreneurial ventures in the state will be rewarded with the ability to further enhance their community and themselves. All levels of society benefit, however, the more you have the better off you are in a state that does not tax income.
This is because generally across the country, the wealthiest families pay a smaller percentage of their total income toward tax. A think tank calculated that the richest 1% in the US pay 7.4% of their annual income in tax. Those in the top 20% pay 9.9% and those in the lower income brackets pay 11.4%. In a city like Las Vegas, with how it orients itself toward attracting business and investment, effective tax rates for the very rich could fall to as little as 1.9%. Those in the next 20% have an effective tax rate that fell to 7.6%. USA Today published the think tank's findings and also the conclusion which saw Nevada come out as the most tax-friendly state for the wealthy.
What taxes affect luxury home buyers in Las Vegas?
The main way cities raise money to fund city projects, build and maintain infrastructure, keep public schools open, and generally keep a city running is to impose taxes on residents. How then are states like Nevada and the city of Las Vegas able to function while operating a no-tax-on-income model? A significant portion of Nevada’s revenue comes from the Gaming Percentage Fee and State Sales Tax, which combined, contribute to almost half of the state’s revenue. A relatively small amount comes from Real Property Transfer Tax. So how do these taxes affect homebuyers in Las Vegas?
- The Gaming Percentage Fee does not directly affect investors but does play a significant part in allowing the city of Las Vegas to continue being a very tax-friendly location.
- The sales tax does directly affect residents in their day-to-day purchases. Las Vegas has a sales tax that is set at 8.375%. This is made up of the Nevada state sales tax which in 2023 was set at 4.6% and the Clark County sales tax which is set at 3.78%.
This tax is passed to the end-user or the buyer of goods and services. This is one of the higher sales tax rates in the US but it is lower than in areas such as Los Angeles where you can expect to pay 10.6% sales tax. Bear in mind that California is a state which also imposes an income tax. On the whole, many people who move to Nevada find that the relatively high sales tax is more than offset by the numerous tax advantages. This is especially true for high-net-worth individuals who may own businesses or have business dealings within the state.
- Property tax in Nevada is some of the lowest in the country. While the national average is close to 1% of the value of the property, Nevada’s average is 0.48%. In Las Vegas, Clark County this figure rises to 0.64%. This rate rise is not too surprising as Clark County holds almost 75% of Nevada’s population, and contains the city that brings in the highest revenue. Still, 0.64% is still considerably lower than the national average. Furthermore, homeowners are protected from rate hikes as the state has imposed a maximum increase of only 3% annually.
Low property tax is a massive incentive for those looking to invest in luxury homes in Las Vegas. Let’s take a very simplified and general example of a luxury home valued at $3M in both Las Vegas and New York. In Las Vegas, the property tax rate is 0.64% meaning that a homeowner will pay an annual property tax of $19,200. The homeowner in New York has to pay a property tax rate of 1.72%. Their annual property tax payment will be $51,600. Other factors are taken into consideration, but it is clear that luxury homebuyers are likely to be much better off in Nevada.
- The Real Property Transfer Tax (RPTT) is levied for any property that is transferred from one owner to another. Currently, this tax rate is set at $2.55 per $500 of the value of the property. The good news for buyers is that most of the time, this tax is shouldered by the seller. However, since this is negotiable, it is worth having a real estate agent who has strong negotiation skills representing your interests.
There are exemptions to the RPTT, such as when an owner is transferring the property to a blood relative or someone of close affinity. Again, a real estate agent who knows the nuances of real estate law in Nevada will allow you to explore your possibilities.
The development of ultra-luxury properties
The tax benefits that Las Vegas provides to its residents, along with the beautiful natural landscapes, amenities, and easy access to entertainment have drawn the attention of many high-net-worth investors. This in turn has fuelled a boom in the development of ultra-luxurious properties, residences, and communities.
Many are moving from states that impose high-income taxes, have high property tax rates, and where ultra-luxury properties (those costing $5M or more) are beginning to look less appealing.
Over the last few years, many high-profile individuals have left states like New York and California and have chosen to move to Nevada. It’s simple really, they compare what they can get for an ultra-luxury property in Nevada as opposed to the other states, assess the financial advantages they receive, look at the lifestyle on offer, and decide to move.
There’s The Ridges in Summerlin, a gated community that encapsulates luxurious modern living. Properties here have easy access to a state-of-the-art medical center, fantastic retail and dining options, a world-class golf course, and homes that are exquisitely designed to blend seamlessly into the natural environment.
There’s Ascaya which has a glorious view of The Strip and the Las Vegas Valley. The architecture and design are world-class and the property here truly defines the ultimate expression of Dessert Contemporary. If you had any reservations about living in the relatively dry climate of Nevada, you may change your mind once you see Ascaya.
There’s Southern Highlands with its tree-lined streets and beautifully designed homes. The community has a world-class golf course and spa. The whole area exudes comfort, luxury, and easy living.
These are just a few of the communities available for discerning investors. You can explore more exclusive communities and neighborhoods here.
Being considered a resident or domiciled
Before you can take advantage of the numerous tax benefits of Nevada, you have to be a resident or considered domiciled in the state. You may have to undergo a test of close connection which was designed to prevent the abuse of tax benefits for people who did not have much association with Nevada.
The state will take into account factors such as if you have bank accounts located within Nevada, and whether your driving license is registered in the state. However, the biggest factor that will affect your status in Nevada is if you own property. Owning real estate in Nevada allows you to claim that Nevada is your primary place of residence entitling you to all the tax benefits of the state.
Partnering with your best option
Buying a luxury home in Las Vegas can be so much more than getting a nice place in a nice neighborhood. It can be the acquisition of what really is a dream home. Gavin Ernstone founded Simply Vegas to make those aspirations a reality. With his 25 years of experience in the luxury real estate market in Las Vegas and the surrounding areas, he can land you that luxury home in one of the best locations in the US.
Success has been built over time and Gavin has shown a dedication to providing the highest levels of personal service to his clients. Buying your dream home shouldn’t be a nightmare process. Let Gavin open the doors to your luxury home in Las Vegas. Contact him at 702.523.3677 or leave him a message here and let’s begin your journey.